Orders of Magnitude and Online Personals Industry

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1. The online personals industry took its first breath in 1992. In the beginning, the industry experienced very slow growth. Nonetheless, by 2005, due to positive changes in public perception, the industry was booming. By the end of 2007, the industry had grown to a $900 million market. Observers expect the market size to double by 2012. The industry serves its customers by enhancing the ‘self-actualization’ stage of an individual’s (Maslow’s) ‘Hierarchy of Needs.’ It seeks to provide that one-of-kind-product in a way that not only distinguishes the product but the customer itself. The industry’s low customer loyalty rate, high customer bargaining power, diverse range of substitutes, low barriers to entry and moderately intense rivalry makes this a relatively unattractive industry. However, with a well-balanced infrastructure and customer base, a company has the potential to enjoy decent margins. 2. eHarmony’s most important resources are its high level of expertise, its patented ‘Matching Algorithm,’ and its research and development laboratory. These resources greatly enhance eHarmony’s success and customer acquisition rate by boosting the perception of its reliability in the minds of its existing and potential customers. 3. Based on the product/service this industry aims to offer, taking a differentiation-based approach will (arguably) decide how successful a company is gaining competitive advantage. eHarmony seeks to gain competitive advantage by quite successfully marketing the superiority of its service (backed by “science) to its customers. It does this by charging a higher price for its service (which gives it the notion of being of better quality) and advertising its ‘backing’ by research and high level of expertise. 4. eHarmony should focus on strengthening its position within the current “long-term relationship” market segment (the first option). For now, it should refrain from diverging into other areas of the market as its risks losing its focus on its core competency.

Online Personals Industry
The online personals industry took its first breath in 1992. Initially, the industry met with “luke warm response” (p.3). A significant factor for such a slow rate of acceptance was the stigma that online personals websites “were considered appropriate only for the truly desperate” (p.3). The online mode of the ‘Personals Industry’ also suffered from a high level of customer dissatisfaction and low customer loyalty. In 2005, the industry changed dramatically. Sixteen million people “(had claimed) to have visited an online personals site at least once” (p.3). Growth was largely attributed to “social acceptability” (p.3). Word-of mouth marketing seemed to have played a material role in getting this industry the attention that it long awaited for. Even though after 2005, the number of users that visited these sites fell from 20% to 10%, this did not translate into a decline in paying subscribers. The industry had grown to $900 million by 2007. Observers believe that industry size could double by 2012, since most of the subscribers tend to be repeat customers. Customer Need (Maslow’s Hierarchy of Needs)

The online personals industry served its customers in a very unique way; it fulfilled one of the basic necessities of the ‘self-actualization’ stage of the Maslow’s Hierarchy of Needs. It served them with a “product” aimed to sustain for a lifetime. It helped individuals find a source of “appreciation” or, as Maslow would suggest, it helped individuals satisfy their need of feeling loved. The end result of how the concept of marriage evolved in the American culture very well complements this business model. Americans no longer believe that the purpose of marriage is to have children. Now, 70% want “their spouse to make them happy.” (p2.) The industry seems to have found a way to attract and serve its customers like no other industry. Porter’s Fiver Forces Model

Bargaining power of...
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